What is an Invoice

An invoice is a document a seller issues to a buyer for goods or services provided which lists the products/services, quantities/rates, amounts, payment terms, and payment due date. Invoices can be issued before or after products/services are delivered, and an invoice can come in either digital PDF or physical paper format.

The invoice also represents the presence of credit between seller and buyer, where the seller provides products/services without receiving a payment upfront. It’s not uncommon for sellers to include an early payment discount if the invoice is paid before the invoice due date.

The use of an invoice is more prevalent in business-to-business (B2B) transactions in comparison to business-to-consumer transactions. There are many reasons invoices are more common in B2B transactions, but to name a few, B2B transactions typically include invoices due to complex B2B pricing models, purchase order requirements, and various payment methods such as ACH, wire, or check. Invoices are also not mandatory for B2C transactions in the US.

Invoice vs. Receipt

While a receipt is a document that lists the products/services, quantities/rates, and amounts, the receipt also acknowledges that payment has been received. In comparison, an invoice does not acknowledge payment has been received as the payment is still outstanding, therefore, the invoice includes the payment terms and payment due date.